VANCOUVER, B.C., CANADA, July 23, 2009 - Magma Energy Corp. (TSX: MXY) announces that it has signed an agreement to acquire from Geysir Green Energy a minority interest in HS Orka, a large producing geothermal company in Iceland. The agreement provides that Magma will purchase an 8.62% shareholding in HS Orka for 2.5 billion Icelandic Króner ("ISK") (approximately US$20 million) payable at closing and a 2.16% shareholding in HS Orka for 625 million ISK (approximately US$5 million) payable by March 31, 2010. In connection with the purchase, Magma will also obtain an option to acquire approximately a 5% additional shareholding in HS Orka by making a capital infusion of US$15 million into HS Orka.
HS Orka is the largest privately owned energy company in Iceland. Installed geothermal power capacity is 175 megawatts ("MW") from the Svartsengi and Reykjanes power plants. In addition, HS Orka generates 150 MW of thermal energy for district heating. Expansions are planned that will increase HS Orka's geothermal power production to 425 MW by 2015. HS Orka's 75 MW Svartsengi plant began production in 1978 and its 100 MW Reykjanes plant began production in 2006. Much of the power is sold under US dollar contracts to a large aluminum smelter that is one of the world's lowest cost aluminum producers. The expansion plans of HS Orka will provide power to a new aluminum smelter that is currently under construction.
The agreement is subject to approval by the TSX. Other closing conditions include a waiver of pre-emptive rights held by third party shareholders of HS Orka and satisfactory negotiations with third parties in respect of HS Orka's debt agreements. Closing of the transaction is expected in September, 2009. A comprehensive technical report prepared by an independent engineering firm Mannvit Engineering will be filed on SEDAR after closing.
Ross Beaty, Magma's Chief Executive Officer, said, "This transaction will increase Magma's direct and indirect installed gross geothermal power production to 26 MW immediately and up to 91 MW after HS Orka's planned expansions and Magma's current 12 MW expansion at its existing Soda Lake operation in Nevada. In addition, it gives Magma exposure to the large and well developed Icelandic geothermal industry, enabling synergies with Magma's other geothermal assets internationally and other opportunities for growth within Iceland's geothermal community."
Magma was advised on the transaction by Glacier Partners, an investment advisory firm specializing in the geothermal and seafood industries.
About Magma Energy Corp.
Magma Energy Corp. is a geothermal power company which is actively engaged in operating, developing, exploring and acquiring geothermal energy projects. We currently have one operating power generation plant (the Soda Lake Operation in Nevada), and an extensive portfolio of exploration properties throughout the western United States, Chile, Argentina and Peru.
About Iceland's Geothermal Industry and Geysir Green Energy.
Iceland has one of the world's largest and best developed geothermal industries, supported by substantial geothermal resources and a highly skilled domestic workforce. Geothermal energy accounts for 23% of Iceland's electricity demand and powers many of Iceland's homes and businesses, including Iceland's large aluminum industry.
Geysir Green Energy is a private geothermal development company with a majority stake in HS Orka, a 100% interest in geothermal drilling company Iceland Drilling, and significant geothermal assets elsewhere in the world.
Contact: Andrea Zaradic, Vice President, Corporate Development
Magma Energy Corp.
Cautionary Note regarding Forward-Looking Statements and Information
This news release contains certain "forward-looking information" within the meaning of Canadian securities laws, which may include, but is not limited to, statements with respect to future events or future performance, prospects for closing our acquisition of an interest in HS Orka, plans to expand our and HS Orka's geothermal power production, management's expectations regarding our growth, business prospects and opportunities and geothermal energy generation capacities. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.
A number of known and unknown risks, uncertainties and other factors, may cause our actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information. The forward-looking information is based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions about: conditions to closing our acquisition of an interest in HS Orka being met, the success and timely completion of planned exploration and expansion programs, the growth rate in net electricity consumption; support and demand for non-hydroelectric renewables; government initiatives to support the development of renewable energy generation; the accuracy of reserve estimation methodology and analysis used to estimate the quantity of potentially recoverable thermal energy; geological, geophysical, geochemical and other conditions at our properties; the reliability of technical data, including extrapolated temperature gradient, geophysical and geochemical surveys and geothermometer calculations; capital expenditure estimates; availability of capital to fund development and expansion programs; and general economic conditions. Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-looking information and statements will occur.
There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance on forward-looking information. Other than as required by applicable securities laws, we assume no obligation to update or revise such forward-looking information to reflect new events or circumstances.